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U.S. consumer confidence fell less than expected in August, with households still upbeat about the labor market despite an escalation in trade tensions, which has cast a shadow over the longest economic expansion in history. While the survey from the Conference Board on Tuesday did not change expectations that the Federal Reserve will cut interest rates again next month, it further reduced the chances of an aggressive easing to counter the effects of the U.S.-China trade war, including tighter financial conditions. Fed Chair Jerome Powell told a conference of central bankers last week that the economy was in a “favorable place,” but reiterated that the U.S. central bank would “act as appropriate” to keep the economic expansion, now in its 11th year, on track. The Fed lowered its short-term interest rate by 25 basis points last month for the first time since 2008, citing trade tensions and slowing global growth. Financial markets have fully priced in another quarter-percentage-point cut at the Fed’s Sept. 17-18 policy meeting. “The consumer remains confident despite the ongoing trade war between the U.S. and China and this bodes well for the economic outlook in the second half of the year,” said Chris Rupkey, chief economist at MUFG in New York. “Consumers may have even seen July’s rate cut as good medicine for the economy which will help keep the economy on the sustainable growth path.”

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"More than a year into the U.S.-China trade war, American consumers are about to find themselves squarely in the crosshairs for the first time, with households estimated to face up to $1,000 in additional costs each year from tariffs, according to research from JPMorgan Chase"

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... A measure of consumer confidence fell in August to the lowest level since the start of the year, reflecting fresh worries about trade tensions with China and the possibility of a looming recession...

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"More than a year into the U.S.-China trade war, American consumers are about to find themselves squarely in the crosshairs for the first time, with households estimated to face up to $1,000 in additional costs each year from tariffs, according to research from JPMorgan Chase"

Ah if only I had a nickel for every wrong opinion from JPMorgan research. I'd be as rich as old John Pierpoint himself.

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Ah if only I had a nickel for every wrong opinion from JPMorgan research. I'd be as rich as old John Pierpoint himself.

What everybody seems to be missing is that wage growth for the bottom 50% of the workforce has been flat for the past decade, and longer. Although there is some indicator of an increase in consumer spending, what is really being observed is the result of deferred spending and deferred maintenance. For example, there is only so long that you can defer painting the outside of your house, and then when that paint is coming off it peels, it just has to get done. At that point the consumer supplier stores, local paint & Hardware and the Big Box outlets such as Home Depot and Lowe's, are going to see an uptick in paint sales and brushes and tools such as sanders. It is easy enough to mistake this for "consumer confidence." I put it down to deferred maintenance.

The same phenomenon has become noticeable in hard goods such as autos. Instead of level sales yearly, now there are these boom years every ten years, when the old stuff finally gets to the point it is scrapped. Then in between it is famine, with the retailers playing dog eat dog out there for customers.

Until you see steady real wage growth, an expanding economy is mostly a myth. Also, dropping interest rates by 25 basis points is not going to do it. You will need larger reductions than that. Take a look at Europe and Japan, especially Denmark: now the home mortgage loan rates are effectively negative, and the borrower is getting paid to take out a loan. That is my idea of a serious loan! 😋😋